Assignment 1:

While this case study is based on actual businesses, the facts have been changed to meet the instructional exigencies of the case study. As a result, the case study should not be construed as an accurate factual depiction of the businesses' strategies, activities, or financial condition. Nor should the case study be treated as making any inference about the merits of the actual businesses' strategies, activities, or financial condition.

Instructions:

i. Having resolved to proceed with the PLM Acquisition, discuss and agree on how you want to finance the deal. Prepare a power point presentation on the modes of financing considered and the key reasons for settling to entertain some or all of them. Your Power Point should highlight necessary regulatory steps that must be taken to achieve the selected funding source. Your PowerPoint should involve no more than seven slides and the Class presentation should take no more than 20 minutes. Your PowerPoint presentation must be submitted to the Instructors by 3:00 pm on Sunday of next week.

ii. You have decided to further instructInvestment Banker to assist you with the PLM Acquisition financing based on the selected method of financing. Consult with Investment Banker and assist it with preparing a PowerPoint presentation that outlines AEC's goals with respect to PLM and the types of financing AEC is prepared to entertain. Prepare a formal request letter to the Investment Banker askingthem to assist AEC come up with a formal request for financing proposals that will be sent to the capital sources. Please specify the key elements that you would like to see in the Financial Proposal to be prepared by the Investment Banker. Feel free to discuss these elements with the Investment Banker. Investment Banker will come up with the formal request for financing proposals, which they will need to present in the next class. (Investment Banker has the option to selectively include the AEC Directors in its oral presentation.) .

iii. Important reminders and restrictions:

• Both PLM and AEC are currently separate legal entities and AEC has subsidiaries who could act as guarantors
• Any substantive merger of PLM into AEC would require you to renegotiate all of your current AEC funding; acquisition of PLM without a merger (with PLM simply becoming a subsidiary of AEC Holding) would not require this.
• You can negotiate either a share purchase or an asset purchase in order to execute PLM Acquisition. However, an asset purchase will require you to transfer the assets to some new or current AEC entity and to renegotiate any current PLM funding that you wish to continue.
• There are provisions in the current AEC financing agreements, which may restrict your ability for AEC to undertake any future borrowing; these restrictions will not impact your ability to use the assets, or obligation, of PLM to fund your acquisition.
• PLM has assets that are unencumbered (are not subject to security interests) and could be used to secure PLM funding.
• You must have at least $100 million available and open funding sources for PLM's post-acquisition inventory financing and $25 million for its two-years operating expenses. These sums are over and above the funding sources you will need to continue to service your current AEC operations.
• After PLM Acquisition, AEC must continue inventory financing equal to that currently provided by the QNB Credit Facility. Given the restrictions contained in the current AEC Credit Facility, AEC does not have the available cashflow to use any credit balance on the Credit Facility for purposes of funding the PLM Acquisition.
• You must have a post-Acquisition, PLM Receivables Trust in place with a capacity of up to $250 million funding for future PLM receivables.

Assignment 2:-

Capitalization is the sum total of a corporation's stock, long-term debt and retained earnings. Companies face the question, whether during incorporation or as part of a fundamental corporate transaction, whether to raise capital for the company by increasing or decreasing the equity (share) ratio, or by increasing the debt ratio.

Sources of funds
A company might raise new funds from the following sources:

• The capital markets: i) new share issues, for example, by companies acquiring a stock market listing for the first time
• Loan stock (debentures, promissory notes, bonds, sukuks (A debenture is a type of debt instrument that is not secured by physical assets or collateral. debentures are typically issued to raise short-term capital for upcoming expenses or to pay for expansions
• Retained earnings
• Bank borrowing (overdrafts or short term loans)
• Asset based lending
• Government sources
• Business expansion scheme funds
• Venture capital

1) Resolution of the issues (i) who is entitled to the financial returns yielded by the corporation, (ii) who has to bear the financial risk of the corporations' financial failure, and (iii) who controls the corporation, are vitally important to the structuring of the entity. What generally are the legal options/devices available to accommodate the different issues - return, risk, and control?

2) What are the pros and cons of debt versus equity financing?

3) Asset Financing

• Asset Financing Versus Asset-Based Lending
• Secured Versus Unsecured Loans

4) How does the presence or absence of a security interest typically affect the debtor's cost of capital?

5) What financial instruments are included in the class of securities?

6) Bond financing is used for what sort of corporate capitalization and how does it differ from single-source loans?

7) What is an indebenture trust, how is it structured and what is the role of a debenture trustee?

8) What affect will a loan covenant that purports to limit the debtor's ability to borrow have on the debtor? What affect will it have on other creditors?

9) What are loan subordination agreements?

10) How are parent subsidiary relationships of AEC likely to be structured?

11) In the event that AEC capitalizes its PLM Acquisition using debt and the AEC parent is the principal and sole borrower, what resort would the lender(s) have to the subsidiaries and their assets?

12) What advantage does a guarantee offer a lender?

13) If one or more of the AEC's subsidiaries guarantee the debt of their parent entity and subsequently use their assets to satisfy the debt, what rights does the subsidiary have against the parent? If the parent satisfies the debt, can it demand contribution from the subsidiary guarantors? If one subsidiary-guarantor pays the loan, what recourse would it have against the other guarantor-subsidiaries? What rights would a guaranteeing subsidiary have in the event that it transpired that the lender had failed to perfect its security interest in parent's assets or the assets of another guaranteeing subsidiary?`

14) What is the principal body of law controlling security interests (secured transaction) in personal property?

15) Perfection of a security interest requires that the interest "attach" and that some form of public notice be provided. What functions does attachment and notice respectively provide?

16) What form(s) of notice is required in order to perfect a security interest in personal property? What determines the specific form of notice that is required?

17) What is a "floating lien" and what language in a security agreement will create one?

18) What does it mean when a security interest is "under collateralized" and what affect does this have on the status of the secured claim at state law and in bankruptcy?

19) What are the differences between "asset-based" versus "cash-flow" lending in terms of the type of collateral, type of loan, source of repayment, degree and type of monitoring, type of loan covenants, and the type of lending institution?

20) What is a promissory note (sometimes referred to as a "negotiable instrument")? Why would one of AEC's lenders likely require AEC to issue it a promissory note in addition to signing a loan agreement? What determines whether the promissory note is an order instrument or a bearer instrument, and how does the difference in character control the way the instrument must be negotiated?

Attachment:- Assignment.rar